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GST: Memorandum highlighting issues impacting technology and ecommerce industry
GST: Memorandum highlighting issues impacting technology and ecommerce industry

March 28, 2025

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As you may be aware, nasscom periodically engages with members to highlight to the government key GST issues hampering growth of technology and eCommerce Industry.  Based on feedback from industry, we have submitted the attached memorandum of suggestions to officials of Department of Revenue and GST Council. The suggestions are aimed to enable growth and ease of doing business for the IT-BPM and eCommerce Industry. The suggestions are divided into the following categories:

  1. Issues impacting technology Industry
  • Emerging issues
  • Issues emerging due to recent clarifications
  • Input tax credit related issues
  • Refund related issues
  1. Ecommerce sector issues
  2. Forward thinking ideas that are revenue neutral

Summary of the top issues is provided below:

S.No.

Issue

Recommendation

1.

Remove the exception of taxing intermediary services exports, as IT services exports continue to face denial of ITC refund and risk of GST liability due to misclassification of IT services as intermediary services.

We have been highlighting this issue since 2022. However, no action has been taken on this.

  1. To address the issue on a holistic basis, the government should do away with specific proxy for “intermediary services” (applicable in case of cross-border services) and make it as export of services. This was even recommended in para 15.2 of 139th Parliamentary standing committee report as well.
  2. In the interim, we request the government to provide immediate relief to the industry through issuance of an updated circular accepting the order passed by Hon’ble CESTAT, Mumbai (appeal application dismissed by Supreme Court) in the case of Chevron Phillips Chemicals and Hon’ble High Court in the case of Genpact India. The updated Circular should be extended to encompass additional scenarios where services are provided on principal-to-principal basis, including but not limited to sales and marketing, sales support services, BPO, in accordance with the instances recognised in judicial pronouncements for conferring export status.
  3. Additionally, issue an instruction accepting the above rulings and reinforcing the need for the Circular to be implemented effectively.

2.

Levy of GST under RCM in the hands of HO located in India on revenue of overseas branch

This issue has been prevalent since 2023.

    1. Separate invoicing by India HO and BO, but consideration received by BO as well as consolidated invoicing by Indian HO for offshore services rendered from India as well as onsite services provided by/ through the BO:
      • Clarify that onsite services provided by BO to customer/ procurements made thereon in respect of onsite services should not be considered as ‘import of services’ for the HO, particularly given that the transaction is revenue neutral.
      • Clarify that the condition of “being eligible for full ITC” provided in Circular No. 210/4/2024 should be tested qua transaction and not at an entity level.
    1. Direct invoicing by BO, wherein the BO invoices /bills the client for entire services (onsite and offshore services provided by BO and Indian HO respectively):
  • Clarify that services provided in respect of offshore services would qualify as “export of services” even though billed through branch;
  • Clarify that Branch is independent in its operations (having customers, performing onsite work, having local employees on payroll, filing returns, paying taxes etc.) branch should not be considered as “mere establishments of distinct persons”.

3.

Challenges in relation to implementation of invoice management system

  • Provide clarity/ resolve ambiguities in relation to the issues highlighted. This will enable taxpayers to make required changes in their accounting software and adapt IMS for compliance.
  • Once clarity is provided, industry should be given reasonable time to incorporate these in the ERP/ accounting software. Hence, government should extend time for implementation of IMS and make it applicable w.e.f April 1, 2025. In the meantime, we will be happy to organise consultations along with the industry to provide feedback on the process and any bottlenecks being encountered by the taxpayers.

4.

Challenges in relation to implementation of Input service distributor

  • Amend S. 20 of CGST Act to exclude companies opting for centralised billing model outside of the ISD provisions
  • Exclude taxpayers who follow centralised billing system from ISD registration provisions, where credit is fully eligible.
  • Clarify that unless apparent from the underlying document (e.g. contract, purchase order, invoice etc) that the expense and consequently, the credit is common credit, the classification adopted by the taxpayer for common credit and specific credit should not be unnecessarily litigated by the authorities.
  • Amend Rule 54(1A) of CGST Rules with retrospective effect to allow transfer of common as well as exclusive credits.

5.

Duplicate proceedings initiated by multiple authorities, resulting in hardship for the industry

The industry has been facing this issue since 2022. We request the government to:

  • Issue appropriate instructions to field formations to abstain from proceeding with investigations, where inquiries are already under progress by another authority or agency.
  • Issue detailed guidelines for companies to adhere in case of multiple investigations.

6.

Clarify that TR-6 challan is a duty payment document for availing credit of IGST/Compensation cess

  • The industry has been facing this issue since 2023. We request the government to issue suitable clarification/ modification in Circular 16/2023-Cus dated 7th June 2023 to treat TR-6 challan as an eligible duty paying document for the purpose of availing ITC.

7.

Clarify the duty paying document that can be used by STPIs for debonding of goods

  • The industry has been facing this issue since 2023. We request the government to issue a clarification on duty paying document for debonding of assets by STPI units, i.e., amended BOE in terms of S. 149 of Customs Act issued for Advance Authorisation. This will allow field officers to accept revised BOE by STPI units as well at the time of debonding, which is not accepted currently.

8.

Necessity to ease SEZ endorsement process

The industry has been facing this issue since 2017.

  • During service tax era, one-time approval was provided to each supplier for services rendered to SEZ units. Similar practice can be followed under GST to avoid invoice-wise approvals through DSPF.
  • Remove the requirement of providing supplier LUT in DSPF for enabling units to take the benefit of zero rating. Alternatively, government should provide a mechanism to link supplier GSTIN with supplier LUT. With this, supplier LUT could be auto populated basis the supplier GSTIN details fed in the DSPF form.
  • There should be an API based integration of SEZ online with GST System. For processing refund of IGST paid on exports, the export invoices are today shared by GST system with Customs System (ICEGATE) using APIs.

9.

Applicability of interest in case of delayed return filing

  • The industry has been facing this issue since 2023. We request the government to extend the benefit of non-applicability of interest for all returns including Form GSTR-5A and GSTR-8.

10.

Challenges in submitting CA / CMA certificate for post-sale discounts in terms of Circular No. 212/6/2024-GST

  • The tax limit for which CA/ CMA certification should be increased from INR 5 lakh to INR 50 lakhs.
  • Authorities should be directed to accept any format of the certification so as long as the reversal of credit by the recipient can be substantiated.
  • Mismatches in accounting details of credit notes in books of accounts of sellers vis-à-vis recipients should not be questioned as long as ITC have been reversed.

 

 We believe implementing these measures will significantly improve ease of doing business and provide certainty to the industry with respect to the treatment under the GST.


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20250328_GSTMemorandum_nasscomsubm.pdf

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